The long-term vacancy of two prime retail units in Harrogate’s Royal Baths has cost the taxpayer almost £1 million in lost rent and service charges, the Stray Ferret can reveal.

North Yorkshire County Council paid £9.5 million for the Grade II listed building in 2018. A current council report has valued it at £7 million and forecasts it to generate an investment return of just 1.64%.

But in addition to the £2.5 million decline in property value, the long-term vacancy of both buildings is haemorrhaging lost rental income each month.

A year ago today (December 9, 2022) the council evicted the owners of the Viper Rooms nightclub — one of four commercial units it lets in the Royal Baths.

The venue has stood empty since, despite repeated claims by the council of “significant interest”.

The former Potting Shed bar, which along with the JD Wetherspoon pub and Royal Baths Chinese Restaurant make up the other commercial units, has been empty since the council acquired the historic complex five years ago.

The Stray Ferret asked North Yorkshire Council, which succeeded North Yorkshire County Council in April this year, about the cost of the ongoing vacancies.

A council statement said rent for the Viper Rooms premises “would have been in the region of £90,000 since December last year”.

It added maintenance for the building is covered by a service charge which is approximately £75,000.

The council added no business rates are payable due to an exemption for the premises as a listed asset.

As for the Potting Shed space, the council said the original rent was £125,000 a year when the county council acquired the vacant unit in 2018. That figure represents a loss of £625,000 over five years.

The vacant former Potting Shed unit.

It did not give a figure for the loss of service charge income at the Potting Shed but said no business rates were payable on either premises due to an exemption for them being a listed asset.

The council said “no agent’s fees have been paid at this time” to Savils, which has been marketing the Viper Rooms, adding any fee “will be made when the unit has been let”.

Asked why it was taking so long to find a Viper Rooms tenant, despite the apparent interest, the council said:

“The leisure market continues to be highly variable. Savills has conducted a significant number of viewings, and we do now have offers for both vacant units.

“An offer for the Viper Rooms unit has been accepted while the offer for the Potting Shed is due to be considered shortly.

“The situation of having vacant units is by no means unique and is a widespread issue nationally following the impact of the covid pandemic and the cost of living situation.

“Harrogate’s Royal Baths do, however, cover their costs and the council has not had to use funds from alternative budgets to support the asset.”

Council urged to “get their act together”

Former Conservative councillor Richard Musgrave branded the Royal Baths an “under-performing trophy asset” in 2021 because of the sum paid and returns generated.

The continued loss of rental income since, the depreciation of the value of the asset and its low investment returns has again raised questions about the council’s business acumen.

The Royal Baths forecasted return of 1.64% is by far the lowest in the council’s portfolio.

Cllr Stuart Parsons, leader of the Independent group on Conservative-controlled North Yorkshire Council, said the situation was “extremely concerning”. He said:

“The council really ought to get their act together and get it sorted immediately.

“A 1.64% return on investment is very low. They could have put the money in the bank and got just under 5%.”

Cllr Parsons said the newly formed council was still going through its investment portfolio to decide which assets to keep.

The Royal Baths complex

Tom Gordon, the Liberal Democrat candidate for Harrogate and Knaresborough at the next general election, said:

“North Yorkshire Council’s approach to business and investment in Harrogate is disappointing, and we deserve better.

“The continued cuts to local government from the Conservative government have left local authorities scrambling to buy up investment properties as new revenue streams. Often they do not have the skills of expertise to make a success of such investments, and we can see how that plays out first hand with the Royal Baths as one example.

“Their approach has been shortsighted, resulted in the loss of local businesses, and decreased the value of the assets they purchased. Someone should be accountable for this decision.”

Read more:

• Harrogate’s Royal Baths: the council’s under-performing ‘trophy investment’
• Harrogate nightclub Viper Rooms closes suddenly
• Viper Rooms owner says Harrogate landlords need to ‘get real’ with rent

Asked to respond to claims that it lacks the commercial acumen to run businesses, the council said:

“North Yorkshire Council has a wide range of skills among its own staff, but also recognises that external support is necessary for assets that are more complex. A number of external professionals assist the council in managing this asset is the best interests of local residents and taxpayers.”

Paul Kinsey, who owned the Viper Rooms, has been locked in protracted negotiations with the council over the fixtures and fittings, declined to comment.

Harrogate’s struggling Royal Baths could soon have two new tenants.

North Yorkshire County Council bought the site as an investment asset for £9 million in 2018 but it has not generated the returns hoped for.

When the council bought the site, the units were occupied by J D Wetherspoon, The Potting Shed bar, the Viper Rooms nightclub and Royal Baths Chinese Restaurant.

But the Potting Shed has been closed for years and the sudden demise of the Viper Rooms in December left half the units unoccupied.

Days after the Viper Rooms closed, the council said the site had attracted “significant interest from potential tenants”. But three months on it remains empty.

In an update today, Gary Fielding, the county council’s corporate director for strategic resources, said:

“A unit which did house the Viper Rooms is continuing to attract significant interest, and an agent has been appointed to co-ordinate discussions with potential tenants.

“A lease has been signed for the final unit and a dialogue with the tenant is continuing to establish when the new venture will be launched.”

The new North Yorkshire Council will assume control of the Grade II listed Royal Baths on April 1 when the county council, along with seven district councils including Harrogate Borough Council, ceases to exist.

Read more:

• Viper Rooms: council issues statement after repossessing Harrogate nightclub
• Questions raised as Harrogate Royal Baths loses £2.5m in value

The Royal Baths Chinese Restaurant in Harrogate re-opened last night.

The restaurant, set in the Grade II listed Royal Baths, is one of the most historic and opulent places to dine in Harrogate.

It has been closed since the end of 2020 and was also shut for most of 2020 due to lockdowns.

But after extensive repair work due mainly to damp, people once again have the chance of a unique eating experience.

The building, which has a central dome and pillars down the side, was built between 1894 and 1897 and for many years was Europe’s premier destination for spa treatments. It is now owned by North Yorkshire County Council.

The restaurant has served traditional Chinese food for about 13 years and will continue to do so.

Read more:

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A restaurant spokesman said the 100-seat venue would be similar to how customers remembered it, with the VIP room and terrace bar and dining area back in operation. However, the party room is currently unavailable.

He added:

“We have a new team of staff starting and ask people to be patient when we first re-open.

“But it’s very much the same Royal Baths Chinese Restaurant. We have been here for 13 or 14 years now and look forward to welcoming customers back.”

The owners opened the Royal Baths Express takeaway in Pateley Bridge in February.

They also continue to operate Haks Little Royal Baths Chinese Restaurant, on Harrogate’s Station Parade.

More pictures from The Royal Baths Chinese Restaurant

The bar, which leads to the outside terrace.

The terrace area.

The Grade II listed building was built from 1894 to 1897.

Inside the main dining area.

An investigation by the Stray Ferret has revealed that Harrogate’s Royal Baths have massively under-performed as a commercial investment since they were bought by North Yorkshire County Council in 2018.

The council bought the Grade II listed building for £9 million in 2018 as part of a wider strategy to become more entrepreneurial to plug its declining budget from central government.

But the Baths have only generated about a third of the income expected, raising questions about the wisdom of the decision to buy it, as well as whether the council has the necessary business acumen to invest taxpayers’ money in such schemes.

The council was accused of making a “trophy investment” last month when one councillor said he was “absolutely’ speechless” by the £9 million sum paid for the Baths.

It has now emerged that rental income is way down on what was predicted in a confidential report to councillors before they agreed to buy it.

Prepared to pay £10m

The report, which has now been made public, reveals the council was prepared to pay up to £10 million for the Baths, which included four commercial units.

At the time, they were J D Wetherspoon, The Potting Shed bar, the Viper Rooms nightclub and Royal Baths Chinese Restaurant. The Potting Shed subsequently closed.

The report forecast the Baths would generate annual income of £500,940.

But gross income received in the three years since then was just £613,000 — way down on the £1.5 million expected. The council has also incurred maintenance and other costs of £222,000 on the Baths to the end of March 2021, further reducing the income figure to £391,000.

Read more:

• Council accused of ‘trophy investment’ for £9m purchase of Harrogate’s Royal Baths
• Royal Baths Chinese Restaurant reveals plans to re-open
• Council warns of ‘ financial pressures’ despite government funding

Philip Broadbank

Councillor Philip Broadbank, a Liberal Democrat who represents Harrogate Starbeck on the county council, said

“The price for the Royal Baths investment seems to be high and the rate of return has been very disappointing and needs to improve.

“The Royal Baths complex is in a central position in Harrogate town centre but margins need to improve quickly for council taxpayers to see some financial benefits. It is vital that all the units are let and fully operational and officers need to ensure that happens soon to help the local economy.

“The periods of closure have been significant and challenging and the poor rates of return need to be substantially improved if taxpayers are to have confidence that the investment policies are to work satisfactorily financially.”

‘It will end in tears’

The council has not been helped by lockdowns, which have affected all three surviving businesses. The Royal Baths Chinese Restaurant remains closed but plans to re-open this year.

Stuart Parsons

Nevertheless, Councillor Stuart Parsons, who represents Richmond and is the Independents group leader at the county council, said the financial performance of the Baths was worrying and predicted the council’s attempts to generate income in new ways would “end in tears”. He said:

“There’s always that belief in local government that they have expertise and can deliver anything but they are experts at delivering services rather than property projects.”

He said the council had been “absolutely strapped for cash by central government for 11 years” and was being encouraged by ministers to find new sources of income to “shore up shortfalls”. But he added:

“We have seen a number of councils fail because they have taken on projects like renewable energy and are unable to deliver them.

“They will try their hardest in North Yorkshire but they don’t have the necessary expertise to drive things forward. This will be one of the black marks against the Conservative government. It will end in tears.

“Councils should not be trading. They should be providing services, not building houses or power plants. If they had kept the £9m it could have been used to help people in desperate need in social care.”

Cllr Parsons added it was concerning that major spending decisions involving taxpayers’ money were being made on the basis of such inaccurate forecasts.

“If they are basing their finances on estimates that are unsound then something seriously needs to change.”

North Yorkshire County Council offices in Northallerton.

Councillor Gareth Dadd, deputy leader of the Conservatives on the county council, has been one of the key supporters of the Baths investment.

The Stray Ferret sent him some questions but he did not reply.

‘Better than treasury returns’

A council spokesman said it received legal advice and a surveyor’s report and undertook comparative market analysis to support the business case and necessary due diligence before buying the lease on the Baths from M&G Property Portfolio.

He added the investment “continues to stand up against the alternative investment opportunities where cash returns amounted to an average return of 0.19% p.a. at Quarter 2 21/22”.

Gross income received to the end of 20/21 was £613,000 and standard treasury returns would have generated £152,000, the spokesman added, and therefore the investment “has realised £461,000 of additional benefit to the council and its taxpayer when compared to our standard treasury returns”.

He added covid and lockdowns had had a significant impact since the Baths were bought in 2018.

“Our tenants, in the hospitality sector, have been significantly impacted by the pandemic with extended periods of enforced closure during 2020 and 2021. We are working with them to reach reasonable terms on recovery of arrears where possible.

“National regulations in force until late March 2022 prevent us from evicting tenants that have fallen into arrears as a result of covid.

“All retail and hospitality suffered significant periods of closure and financial challenge throughout the pandemic. The Harrogate Royal Baths is a local asset and we remain confident that Harrogate and the Royal Baths itself will recover from the pandemic and continue to contribute to the Harrogate and North Yorkshire local economy.

Besides the four commercial units, the purchase of the Baths also included two further units held on long-leases by Harrogate Borough Council at a peppercorn rent occupied by the tourist information centre and the Turkish Baths, as well as two car parks similarly let on long leases at nominal rents.

The council set up the Brierley Group of firms, ranging from house builders to lawyers, in 2017 to bring together council-owned companies and find new ways of making money. However, last year it reported a loss of £639,000.

Further losses are forecast for the current financial year.

The council warned last month it faces “enormous financial pressures” and needed to find £19 million in savings.

A Chinese restaurant set in the main hall of the Royal Baths in Harrogate plans to reopen next year after months of repairs.

Royal Baths Chinese Restaurant has been closed for most of the last two years due to coronavirus lockdowns and an extensive refurbishment that began in May this year.

Because the restaurant is based in a Grade II listed building, the work has been more complicated than expected.

The building, which is owned by North Yorkshire County Council, underwent a series of roof repairs before work started on the internal central hall in September.

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Now the Royal Baths Chinese Restaurant has revealed that the works are almost complete. It said on its Facebook page:

“We are almost finished with the renovations. However we will not be open until after the New Year.

“Royal Baths Chinese Restaurant wish you all a very merry Christmas and happy New Year. We look forward to seeing everyone in 2022.”

Although the Royal Baths Chinese Restaurant has been closed, the owners have continued operating at their other site, Haks Little Royal Baths Chinese Restaurant, on Station Parade.